When buying or selling property, it’s important to understand the terms used by real estate professionals. Here is a list, along with definitions, of just a few of the major terms you’ll encounter in your real estate endeavors:
Amortization: Paying the principal and interest on a loan through regularly scheduled installments.
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Annual Percentage Rate (A.P.R.): The cost of the loan expressed as a yearly rate on the balance of the loan.
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Buy-Down Mortgage: A home loan in which the lender receives a premium as an inducement to reduce the interest rate during the early years of the mortgage.
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Closing: The final procedure in which documents are signed and recorded, and the property is transferred.
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Comparative Market Analysis: An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.
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Escrow: A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.
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Graduated Payment Mortgage (GPM): A mortgage that requires a borrower to make larger monthly payments over the term of the loan. The payment is unusually low for the first few years but gradually rises until year three or five, then remains fixed.
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Lien: A claim laid by one person or company on the property of another as security for money owed.
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Lock Box: A key storage system placed on a home entrance that is accessible only by active, licensed real estate agents who must abide by a strict set of guidelines when showing a seller’s home.
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Multiple Listing Service (MLS): The service combines the listings for all available homes in an area, except For-Sale-By-Owner (FSBO) properties, in one directory or database.
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Principal: The amount of money that the borrower owes on a mortgage.
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Second Mortgage: Another loan placed upon a piece of property.
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Title Insurance: A policy issued to lenders and buyers to protect any losses because of a dispute over the ownership of a piece of property.
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V.A. Loans: A program that allows most veterans to purchase a house without a down payment.
